Related papers: Semiclosed Pricing Mechanism
The dynamics of a stock market with heterogeneous agents is discussed in the framework of a recently proposed spin model for the emergence of bubbles and crashes. We relate the log returns of stock prices to magnetization in the model and…
The presence of significant cross-correlations between the synchronous time evolution of a pair of equity returns is a well-known empirical fact. The Pearson correlation is commonly used to indicate the level of similarity in the price…
The new digital revolution of big data is deeply changing our capability of understanding society and forecasting the outcome of many social and economic systems. Unfortunately, information can be very heterogeneous in the importance,…
One approach to the analysis of stochastic fluctuations in market prices is to model characteristics of investor behaviour and the complex interactions between market participants, with the aim of extracting consequences in the aggregate.…
Involving effects of media, opinion leader and other agents on the opinion of individuals of market society, a trader based model is developed and utilized to simulate price via supply and demand. Pronounced effects are considered with…
Prediction of stock prices plays a significant role in aiding the decision-making of investors. Considering its importance, a growing literature has emerged trying to forecast stock prices with improved accuracy. In this study, we introduce…
We consider arbitrage free valuation of European options in Black-Scholes and Merton markets, where the general structure of the market is known, however the specific parameters are not known. In order to reflect this subjective uncertainty…
This paper considers the problem of consumption and investment in a financial market within a continuous time stochastic economy. The investor exhibits a change in the discount rate. The investment opportunities are a stock and a riskless…
We investigate the mechanisms behind the power-law distribution of stock returns using artificial market simulations. While traditional financial theory assumes Gaussian price fluctuations, empirical studies consistently show that the tails…
We present a model of price formation in an inelastic market whose dynamics are partially driven by both money flows and their impact on asset prices. The money flow to the market is viewed as an investment policy of outside investors. For…
With the increasing integration of power plants into the frequency-regulation markets, the importance of optimal trading has grown substantially. This paper conducts an in-depth analysis of their optimal trading behavior in sequential…
With the fast development of quantitative portfolio optimization in financial engineering, lots of AI-based algorithmic trading strategies have demonstrated promising results, among which reinforcement learning begins to manifest…
The agent-based model of stock price dynamics on a directed evolving complex network is suggested and studied by direct simulation. The stationary regime is maintained as a result of the balance between the extremal dynamics, adaptivity of…
Financial markets have long since been modeled using stochastic methods such as Brownian motion, and more recently, rough volatility models have been built using fractional Brownian motion. This fractional aspect brings memory into the…
Motivated by applications arising in networked systems, this work examines controlled regime-switching systems that stem from a mean-variance formulation. A main point is that the switching process is a hidden Markov chain. An additional…
A new framework for asset pricing based on modelling the information available to market participants is presented. Each asset is characterised by the cash flows it generates. Each cash flow is expressed as a function of one or more…
Model uncertainty is a type of inevitable financial risk. Mistakes on the choice of pricing model may cause great financial losses. In this paper we investigate financial markets with mean-volatility uncertainty. Models for stock markets…
The trade of a fixed stock can be regarded as the basic process that measures its momentary price. The stock price is exactly known only at the time of sale when the stock is between traders, that is, only in the case when the owner is…
Financial markets are a classical example of complex systems as they comprise many interacting stocks. As such, we can obtain a surprisingly good description of their structure by making the rough simplification of binary daily returns.…
Despite the fact that an intraday market price distribution is not normal, the random walk model of price behaviour is as important for the understanding of basic principles of the market as the pendulum model is a starting point of many…